Lending is a principal responsibility carried out by banks to their customers. The challenge with loan advancement in Nigeria is that only few people come forward to borrow given the slow growth in Nigeria Gross Domestic Product (GDP).
Speaking on the state of banks, Head, Research Coronation Merchant Bank Limited, Guy Czatoryski, said the challenge with the banks is that loan demand has dropped significantly in recent years. He said weak loan demand is the biggest challenge facing banks and will continue next year due to poor economic growth.
He explained that regular bank customers that were borrowing excessively before hardly come back for loans given the poor state of the economy. Czatoryski said that weak borrowing now witnessed among bank customers has nothing to do with cost of the loans.
“If you tell me that loans are expensive today, they have been expensive in the last 10 years but that did not stop people from taking loans. It is not a question of pricing for the loans but weak demands for products. The industry is weak. It is very important not to confuse that,” he said. He said the weak demand for loans is affecting banks’ profitability and ability to grow.
Czatoryski said: “How big is the banking sector and how big is the economy? You are talking as if lending is about 100 per cent to Gross Domestic Product (GDP). Lending is only about 10 per cent of the GDP. So, the link between the banking sector and the economy is not strong because most people do not have loans,” he said.
“The outstanding loan from banks is not more than 10 to 15 per cent of the GDP and that is very poor. You are talking of a very small banking sector servicing a large economy. That is the problem, and it will take years for the banking sector to match growth in the economy.
“In the United Kingdom (UK) and America, the economic managers can easily control interest rate because almost everybody has a loan. That is what is lacking in Nigeria, because Nigerians are not taking loans.” He advised that banks should be allowed to make more profits to enable them grow and service larger part of the economy. The Nation
Pix: Logo of some Nigerian banks
